Steag expects more deals in Germany after RWE-E.ON swap

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ESSEN, Germany (Reuters) - Local utility Steag expects more mergers and acquisitions in Germany’s energy market following a landmark deal between E.ON (EONGn.DE) and RWE (RWEG.DE) to break up renewables and networks group Innogy (IGY.DE).

“The energy sector is seeing the next step of consolidation,” Steag’s CEO Joachim Rumstadt said at the company’s annual press conference on Thursday, adding utilities had realised the need to focus and not cover the complete value chain.

Innogy’s breakup, announced last month, will see RWE become Europe’s second-biggest wind power player, while E.ON turns into the continent’s largest power and gas networks group.

Rumstadt said there were foreign utilities in Germany looking to sell their coal-fired power plants while other power firms were interested in entering the German market, not disclosing any names.

Sources previously told Reuters that France’s Engie (ENGIE.PA) was looking to sell its German power plants and that RWE was talking to local peer EnBW (EBKG.DE) about some of its assets.

Rumstadt also said that Steag, which is owned by seven municipalities in Germany’s industrial Ruhr heartland in North Rhine-Westphalia, as well as some of its power plants had attracted outside interest including on possible partnerships, declining to comment further.

RWE is not in talks with Steag about its power plant assets, a spokeswoman for the group said, confirming similar remarks to newspaper Rheinische Post.

Steag saw its sales rise by about 8 percent to 3.6 billion euros (£3.1 billion) last year, while its operating profit (EBIT) jumped 60 percent to 197 million euros. The group expects this year’s EBIT to fall by about 30 percent, hit by lower profits in conventional power generation.

Reporting by Tom Kaeckenhoff; Writing by Christoph Steitz; Editing by Susan Fenton and David Evans